Problems in State Contractor Licensing Laws Part Two
Texas Contractor Licensing LawsResearch was done to see if Texas, among nine other states had any laws similar to California's wherein the combination of two would make an independent contractor basically a statutory employee. The results for Texas were no based on the following:
Only specialty contractors including HVAC, fire sprinkler, plumbing, well drilling require licenses in Texas and electrical contractors/workers are required to be licensed as of 9/1/04. Texas has a Service Contract Regulatory Act which applies to those in the business of marketing service contracts however, residential service contracts sold through licensed Real Estate professionals are exempted from the act but are regulated under the Texas Occupations Code Chapter 1303. HVAC contractors are licensed under Title 8 Texas Occupations Code Chapter 1302.
Texas Contractor Licensing Laws cont'dTwo classes of license are issued for HVAC contractors (Class A and Class B) Under these statutes, workers in trades such as home repair service, HVAC repair, are required to obtain and maintain licenses in order to work in the profession.
1) Minor Work Exemption: None.
2) Other Exemptions/Exceptions: 8 Tex. Occ. Code Subchapter B ? ? 1302.051-063 list exemptions. Work performed is still subject to local permits, inspections and approvals. Exemptions from the licensing requirements include homeowners, HVAC repair/maintenance personnel not providing service to the public, public utility employees, engineers not performing HVAC work for the public, HVAC workers at industrial plant facilities, work on portable or temporary refrigeration equipment, automobile air conditioning, vent hoods, manufactured homes, persons assisting in air conditioning and refrigeration contracting under the supervision of a license holder.
Texas Contractor Licensing Laws cont'd3) Assignments/Transfer:
? 1302.252. Requirement for Air Conditioning and Refrigeration Contracting Company
(a) An air conditioning and refrigeration contracting company must employ full-time in each permanent office a license holder who holds an appropriate license assigned to that company.
(b) A company that does not employ a license holder as required by Subsection (a) at the time a contract for air conditioning and refrigeration contracting services is signed and at the time the services are performed may not collect a fee or otherwise enforce the contract.
? 1302.253. License Classifications
(a) The executive director shall issue a Class A or Class B air conditioning and refrigeration contractor license.
(b) A Class A license entitles the license holder to engage in each type of air conditioning and refrigeration contracting that is endorsed on the license in relation to a system, a product, or equipment of any size or capacity.
Texas Contractor Licensing Laws cont'd(c) A Class B license entitles the license holder to engage in each type of air conditioning and refrigeration contracting that is endorsed on the license in relation to a system, a product, or equipment of not more than:
(1) 25 tons cooling capacity; or
(2) 1.5 million British thermal units per hour output heating capacity.
? 1302.254. License Endorsements
(a) An air conditioning and refrigeration contractor license must be endorsed with one or both of the following endorsements:
(1) an environmental air conditioning endorsement; or
(2) a commercial refrigeration and process cooling or heating
(b) An environmental air conditioning endorsement entitles the license holder to engage in air conditioning and refrigeration contracting for environmental air conditioning within the class of license held.
(c) A commercial refrigeration and process cooling or heating endorsement entitles the license holder to engage in air conditioning and
Texas Contractor Licensing Laws cont'drefrigeration contracting for commercial refrigeration and process cooling or heating within the class of license held.
(d) A license holder may not engage in a type of air conditioning and refrigeration contracting for which the person's license is not endorsed
? 1305.165. License Issuance; Nontransferability
(a) Not later than the 30th day after the date on which the department determines that an applicant has passed the examination required under this chapter, the executive director shall issue a license to the applicant if the applicant has complied with the application requirements and paid the fees required by this chapter.
(b) A license issued by the executive director is valid throughout this state and is not transferable.
4) Penalties: In addition to administrative disciplinary actions and revocation of licenses, criminal penalties may be imposed for certain types of conduct:
Texas Contractor Licensing Laws cont'dIn addition, 8 Tex. Occ. Code ? ? 1303.301-407 provides restrictions on residential service contract companies with penalties for violations thereof. These include fraudulent practices or statements, conditional sales, payments without consent, insolvency, etc. A service contract is defined by statute as follows:
? 1304.003. Service Contract
(a) In this chapter, "service contract" means an agreement:
(1) that is entered into for a separately stated consideration and for
a specified term; and
(2) under which a provider agrees to repair, replace, or maintain a
product, or provide indemnification for the repair, replacement, or
maintenance of a product, for operational or structural failure caused
by a defect in materials or workmanship or by normal wear.
(b) A service contract may also provide for:
(1) incidental payment or indemnity under limited circumstances,
including towing, rental, and emergency road service; or
Texas Contractor Licensing Law cont'd(2) the repair or replacement of a product for damage resulting from a
power surge or for accidental damage incurred in handling the product. But, it does not include (4) a residential service contract sold by an entity licensed by the Texas Real Estate Commission under Chapter 1303. 8 Tx. Occ Code ? 1304.004.
? 1302.260. Issuance and Term of License
(a) On payment of the license fee, the executive director shall issue an air conditioning and refrigeration contractor license to an applicant who:
(1) meets the requirements of this subchapter;
(2) provides evidence of insurance coverage required by the executive director in accordance with this chapter; and
(3) passes the applicable examination.
(b) A license issued under this chapter expires at the end of the license period set by the commission.
Texas Contractor Licensing Law cont'dA Class A license requires insurance in the amounts of $300K per occurrence for property damage and bodily injury, $300K aggregate for property damage and bodily injury, $300 K aggregate for products and completed operations. A Class B license requires limits of $100K in each category.
In addition, a residential service company must show proof of financial ability to fund the repairs per the residential service contracts issued in the state. 8 Tex. Occ. Code ? 1303.151. Further, section 1303.251 provides in pertinent part that:
? 1303.251. Evidence of Coverage
(a) Each contract holder residing in this state is entitled to evidence of coverage under a residential service contract. The residential service company that issued the contract shall issue evidence of coverage under the contract.
(b) A residential service company may not issue or deliver evidence of coverage under a residential service contract, or an amendment to that evidence, to a person in this state until a copy of
Texas Contractor Licensing Law cont'dthe evidence or amendment is filed with and approved by the commission.
Other code sections governing bonds, reserves, etc. of residential service contract provides are found at 8 Tex. Occ. Code ? ? 1304.151-161.
Electricians are specifically regulated under 8 Tex. Occ. Code ? ? 1305. et seq.
6) Reciprocity: Texas has reciprocity with Louisiana as to master electricians only.
? 1305.164. Nonresident License Applicant
The executive director may issue a license under this chapter to an applicant who holds a license in another state and who submits a proper application and pays the required fees if the executive director determines that the applicant is licensed in a state with which there is an agreement to recognize licenses issued under this chapter.
Further, 8 Tex. Occ. Code ? 1302 Subchapter F provides:
? 1302.251. License Required (a) A person may not engage in air conditioning and refrigeration contracting unless the person holds a license under this subchapter or G
Texas Contractor Licensing Law cont'd(b) A license issued under this subchapter is valid throughout the state. A person who holds a license issued under this subchapter is not required to hold a municipal license under Subchapter G to engage in air conditioning and refrigeration contracting in any municipality in this state.
? 1302.262. Notice to Municipalities
(a) A person who obtains a license under this subchapter shall provide a notice to the municipal authority that enforces air conditioning and refrigeration contracting regulations in the municipality in which the person engages in air conditioning and refrigeration contracting.
(b) The notice must inform the municipality that the person has obtained a license under this subchapter and must be in the form required by the municipality.
(c) A municipality may charge a fee to a person who provides the notice required by this section. The municipality shall set the fee in an amount reasonable and necessary to administer this section.
Texas Contractor Licensing Law cont'dSpecial Rules: ? 1302.263. Limitation on License Holder
A person licensed under this chapter may not perform or offer or attempt to perform an act, service, or function that is:
(1) defined as the practice of engineering under Chapter 1001, unless
the person holds a license under that chapter;
(2) regulated under Chapter 113, Natural Resources Code, unless the
person holds a license or is exempt by rule under that chapter; or
(3) defined as plumbing under Chapter 1301, unless the person holds a
license under that chapter.
? 1302.301. Municipal License
An air conditioning and refrigeration contractor license issued by a municipality of this state and that complies with the requirements of this subchapter is valid under the terms of the license within the municipality.
Texas has special laws for regulating companies such as AHS which provide maintenance and repair services for systems in residential homes.
Texas Contractor Licensing Law cont'dThese regulations are found at 8 Tex. Occ. Code ? 1303 et seq. Residential Service Contractors are exempt from the state's insurance laws as follows:
? 1303.003. Applicability of Insurance Laws
(a) Except as otherwise provided by this chapter, the insurance laws of this state do not apply to a residential service company. This subsection does not apply to an insurance company licensed and regulated under the insurance laws of this state.
(b) This chapter does not exempt a warranty or service contract other than a residential service contract from the Insurance Code.
? 1303.005. Applicability to Certain Agreements
This chapter does not apply to:
(1) a performance guarantee given by:
(A) the builder of a residential property; or
(B) the manufacturer or seller of an appliance or other system or
component of a residential property;
(2) a residential service contract executed before August 28, 1979;
Texas Contractor Licensing Law cont'd(3) a service contract, guarantee, or warranty that is:
(A) designed to guarantee or warrant the repair or service of an
appliance, system, or component of a residential property; and
(B) issued by a person who:
(i) does not engage in the business of a residential service
(ii) sells, services, repairs, or replaces the appliance, system,
or component at the time or before the contract, guarantee, or
warranty is issued;
(4) a service or maintenance agreement or a warranty that:
(A) is sold, offered for sale, or issued by a manufacturer or
merchant who manufactures or sells a product or part of a product,
including a structural component, an appliance, or an electrical,
plumbing, heating, cooling, or air-conditioning system of a building
or residence; and
(B) provides for, warrants, or guarantees the maintenance, repair,
replacement, or performance of the product or
Texas Contractor Licensing Law cont'd(5) home warranty insurance as defined by Section 2, Article 5.53-A,
? 1303.002. Definitions
In this chapter:
(1) "Commission" means the Texas Real Estate Commission.
(2) "Contract holder" means a person who is entitled to receive
services from a residential service company under a residential service
(3) "Person" means an individual, partnership, corporation,
association, or other organization.
(4) "Residential service company" means a person who:
(A) issues a residential service contract; and
(B) performs or arranges to perform services under the contract.
(5) "Residential service contract" means an agreement under which, in
exchange for a fee, a person undertakes for a specified period to
maintain, repair, or replace all or any part of a structural component,
an appliance, or an electrical, plumbing, heating, cooling, or
air-conditioning system of a residential property.
Texas Contractor Licensing Law cont'dThe term does not
include a service or maintenance agreement sold, offered for sale, or
issued by a manufacturer or merchant under which the manufacturer or
merchant undertakes to maintain, repair, or replace a product or part
of a product, including a structural component, an appliance, or an
electrical, plumbing, heating, cooling, or air-conditioning system of a
residential property, that is:
(A) manufactured or sold by the manufacturer or merchant; or
(B) installed by the merchant in a building or residence.
In Texas, an employer generally is not liable for the negligent acts of an independent contractor nor is the owner/occupier of the premises where the independent contractor is working.
Texas Contractor Licensing Law cont'dthere are a number of exceptions which make the employer liable for harm caused to others. Those exceptions include:
1) where employer is by statute or regulation under a duty to provide specific
safeguards for the safety of others;
2) where the employer employs an independent contractor to do work involving a special or inherent danger to others;
3) where the employer consented to negligence or defective construction by the contract;
4) where the employer is estopped to deny that the person purchasing materials for use in the project was the employer's agent.
Conner v. Angeline County Lumber Co. (1940) 146 S.W.2d 1093.
Whether a worker is an employee or agent versus an independent contractor is primarily determined by who has the right to control the details/progress of the work except as to final results (other factors are considered in determining independent contractor status but "control" is key).
Texas Contractor Licensing Law cont'dIn Texas laws for particular industries or types of employers impose liability on employers of an independent contractor under certain circumstances which include the following (this is not an exhaustive list):
o Interstate motor carriers cannot avoid liability to 3rd parties by stipulating that the owner of leased equipment is an independent contractor (Morris v. JTM Materials, Inc. (2002) 78 s.W.3d 28, reh'g overruled; Rule 53.7(f)
o Premises owners: A premises owner does not have a duty to ensure that an independent contractor performs his work in a safe manner. Hoechst-Celanese Corp. v. Mendez(1998) 967 s.w.2D 354. However, premises owner can be liable under duty to insure that independent contractor safely performs work, if owner either contractually retains or actually exercises control over the independent contractor's work. Restatement Second, Torts Section 414, Koch Refining Co. v. Chapa (2000) 11 S.W.3d 153, reh'g overruled. (This is a "negligent hiring" issue.)
Texas Contractor Licensing Law cont'do Security Business: Owners of businesses are liable for at least the intentional torts of independent contractors hired to protect property including false arrests, malicious prosecution, etc. where the hirer expects to derive advantage from the independent contractor's acts. Ross v. Texas One Partnership (1990) 796 S.W.2d 206, writ denied.
o Ultrahazardous work: An employer is subject to liability for physical harm to 3rd person(s) caused by the employer's failure to exercise reasonable care to employ a competent and careful contractor: to perform work which involves a risk of physical harm unless skillfully and carefully performed; or, to perform any duty which the employer owes to 3rd persons In determining whether the employer was negligent the court considers whether the employer conducted an inquiry into the contractor's qualifications before hiring the independent contractor. Negligence is not presumed. Sufficient inquiry by the employer is shown by proof that inquiry